Stock Trading Predictions & Technical Analysis: GOLD & Gold Stocks - Continuing to fly high, but for how long?

Monday, November 16, 2009

GOLD & Gold Stocks - Continuing to fly high, but for how long?

$GOLD & Gold Stocks - HOLD

Gold has now gone as high as $1140 today, and as I announced on November 9th in my post: " $GOLD & ABX - Gold soon pulling back?"

"As GOLD continues to move higher along with the market, I think we can expect a small pullback very soon. This should coincide with the Dow's pullback when it does occur, which I expect to be around 10300-10350. For GOLD if this up trending channel persists, it may go as high as 1150 (maybe close to 1200 but less likely) before pulling back possibly around 1060."

What has now happened is that the Dow Jones is now continuing to move higher along with GOLD for which it has been very positively correlated for the past few months. I expected then to to see the Dow perhaps pullback at 10350 along with GOLD possibly going as high as 10200, however these events did not coincide. I now think that GOLD along with the Dow Jones may be at least temporarily an indication of how high the market may go before pulling back. When the Dow Jones hit 10350, GOLD was still at 10115 and its chart still indicated like it had some more room to move higher before pulling back. Indeed today GOLD is continuing higher, and I think this is what is pushing the Dow Jones higher. GOLD moves up because the US Dollar is going down, and therefore the Dow Jones has to go higher to compensate for the weaker dollar. This is the same reason why OIL is also moving higher. Keep in mind that this may be just a few factors among several others, but significant one's nonetheless. It seems that GOLD stocks still have some up side in them, but I'm not sure it will last again for too long, before it pulls back. You may see GOLD stocks possibly move up to another +10%, but they are all in overbought territory, and I think when and if it gets close 1200, you should watch for a market pullback. Basically if GOLD continues higher so will the market. Keep in mind that despite the fact that I see a GOLD pull back coming soon, I am still very bullish long term towards GOLD and like many analysts I do see it eventually hit $1500 and possibly $2000. Ever since GOLD has sharply crossed over $1000, the door for it to move much higher has been opened.

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TECHNICAL INDICATORS

BUY SIGNAL: Indicates the possibility of the start of a new up trend or the continuation of the current up trend. This signal may be often given in the early stages of a potential new up trend that was preceded by a down or sideways trend. Such signals do not always succeed and may fail at time.

BUY: Indicates that the current up trend is already in motion and a BUY SIGNAL was already given earlier. A BUY does not necessarily indicate that the stock will continue higher from here, but simply that the stock is trending up. The further into the trend you decide to take a long position, the more risk you have of seeing it reverse back down sooner rather than later.

STRONG BUY SIGNAL: Indicates a stronger, more significant and reliable signal than a BUY SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG BUY: Indicates that the current up trend is already in motion and that STRONG BUY SIGNAL was already given.

SELL SIGNAL: Indicates the possibility of the start of a new down trend or the continuation of the current down trend. This signal may be often given in the early stages of a potential new down trend that was preceded by an up or sideways trend. Such signals do not always succeed and may fail at time.

SELL: Indicates that the current down trend is already in motion and a SELL SIGNAL was already given earlier. A SELL does not necessarily indicate that the stock will continue lower from here, but simply that the stock is trending down. The further into the trend you decide to sell a position, the more risk you have of seeing it reverse back up.

STRONG SELL SIGNAL: Indicates a stronger, more significant and reliable signal than a SELL SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG SELL: Indicates that the current down trend is already in motion and that STRONG SELL SIGNAL was already given.

HOLD: Indicates that traders who already hold this stock, should hold on as long as the trend persists. This signal is usually given during an up trend for which it would be considered too risky to take a long position at this point.

STRONG HOLD: Indicates that the current trend has been in motion for a while and rarely deviated away from the trend. Although the stock may continue higher, there may not be enough potential up side to trigger a BUY SIGNAL. This type of indicator usually means that the stock has very strong support levels which may have been tested but not broken.

WAIT: Usually given during a sideways trend for which we are waiting for a move that would trigger a BUY SIGNAL or SELL SIGNAL. This could also indicate uncertainty and the risk that would be taken if you were to take a long position at the current level. Taking a long position after giving a WAIT indicator is considered a gamble.